LANSING — Under threat of a gubernatorial veto, legislators passed a Department of Human Services budget in October that excluded a plan to use more performance-based contracting for foster care services. The idea had been proposed as a way to improve services while cutting costs.

When a child is placed in foster care, a DHS field office worker determines whether to use a privately organized foster care service, like Lutheran Child and Family Services of Michigan, or one of the state’s registered foster families. Foster families face the same oversight requirements and regulations regardless of whether they are affiliated with public or private agencies.

There are currently almost 19,000 children in foster care, of which only 36 percent go to licensed foster care establishments. Of those, almost 60 percent are supervised by private agencies, according to DHS.

However, under the new budget private foster care providers will now be funded to assist unlicensed foster homes in becoming licensed. When a child is placed in foster care, Human Services tries to find one of the child’s relatives to take care of the child. This is a foster care arrangement, although the home is not licensed.

Also, part of the DHS budget included lowering the number of children at the W.J. Maxey juvenile justice facility in Whitmore Lake by 80. It currently costs $550 a day to house an offender at Maxey, compared to about $225 to $250 a day through private community-based agencies. The move is expected to save the state $1.7 million.

Human Services will also phase in a single rate of compensation for foster care providers.

The Mackinac Center has followed Human Services privatization in Michigan and elsewhere for nearly 20 years and in 1993 published the report, “Child Foster Care In Michigan: A Privatization Success Story,” available at
www.mackinac.org/255, which discussed the state use of private foster care going back to 1981. More recently, Michigan Privatization Report senior managing editor Michael D. LaFaive published the essay “Relying on Private Agencies Has Track Record of Saving Money” in the Oct. 31, 2007, edition of The Detroit News.

DETROIT — The Detroit City Council has approved a proposal to change its sewage incineration, a move that could lead to decreased costs and reduced emissions, according to the Detroit Free Press.

The proposition would save the city $5 million annually, according to The Detroit News. The city’s own incinerator costs $52 million per year to operate and would require $125 million in upgrades to bring it up to federal standards.

In 2001, the city entered into a contract with a company to build a new incinerator, but the company had financial trouble, according to The News.

The city plans to shut down its incinerator once a new plant is built. Current employees would be transferred.

The Winter 2001 edition of Michigan Privatization Report suggested that the city should get out of the waste business altogether. In his article “Detroit Could Collect Savings from Privatized Garbage Pickup,” adjunct scholar Steve Thomas pointed out that municipalities across the nation have contracted for private refuse collection and disposal. He cited different reports showing savings from contracting for garbage collection running between 29 percent and a remarkable 50 percent in one example from Canada. The entire article can be read at www.mackinac.org/3155.

DETROIT — Wayne County Chief Judge Mary Beth Kelly in September
withdrew her request for privatized Friend of the Court functions,
according to the court Web site. As chief judge, Kelly has the
responsibility of operating the circuit court.

Friend of the Court collects and distributes child support money and
works to enforce court orders on child custody. Judge Kelly wanted a 33
percent increase in staffing levels for the service while maintaining an
overall budget of $28 million for the service. There are currently 169
employees in the court’s FOC office, according to Gongwer News Service.

The court’s labor unions rallied against the move and in order to
negotiate with the bargaining unit, the request was rescinded, according
to Judge Kelly. In November, Kelly announced she would not seek
reappointment as chief judge of the Wayne County Circuit Court after her
term ends. Kelly, who served three terms in that position, told the
Detroit Free Press that anonymous threats and a rumor campaign
contributed to her decision.

PORT HURON — The city of Port Huron projects it will overspend its
budget by $42 million over the next five years if it doesn’t act to
improve its finances, according to The Port Huron Times Herald.

The city has been providing an annual subsidy of $350,000 to its ice
arena and recreation center, McMorran Place, according to city attorney
John Livesay. The facility was built in the 1950s and is operated by the
McMorran Authority. The agreement to operate the facility is set to
expire in 2008, so the city is looking into whether a private-sector
firm can manage the facility more efficiently. Officials would like the
center to operate without a subsidy.

City council members in November advised the city manager to prepare
a request for proposals to operate the facility. The general manager of
the facility stated that he had been approached by two companies to
manage the center, the Times Herald reported.

The city is also looking at contracting out the management of its
River Street Marina and selling its Water Street Marina according to the
Times-Herald. The city already has a buyer for the former and is looking
for proposals to operate the latter. The city’s financial statements
show that the city’s marinas and docks cost nearly $1 million a year to
operate, but have revenues of only $561,000.

DEARBORN — Dearborn voters in November approved a plan to sell the
city’s 88-unit apartment building in Clearwater, Fla., a move that was
spurred by city finances. Dearborn Towers was purchased in the 1960s and
had been used mainly for senior citizen housing for Dearborn residents
with moderate incomes. The proposal to sell the building was supported
by 58 percent of voters.

The proposal commits the city to appraise the
building and sell it to the highest bidder, but does not set a strict
deadline for the sale. According to the Dearborn Press and Guide, the
building is mainly self-supporting, but had only $880,000 in reserves,
an unacceptable amount in the opinion of Dearborn Housing Director Floyd
Addison. In addition, the building is likely to need a new roof in 2008.
The sale was proposed and supported by Mayor John O'Reilly, who argued
that the cash-strapped city could not afford to hold on to the building.

BUCHANAN — Buchanan city officials needed to hire seasonal workers
or else use a private company to provide leaf pickup services, according
to the St. Joseph Herald-Palladium.

The city typically hires seasonal labor to help full-time staff with
leaf removal, but some council members wanted to explore contracting to
save money, according to Assistant City Manager Joe Vander Meulen.
However, council members voted to stick with seasonal labor this year.

Temporary employees are paid $8 per hour for seven weeks of work as
needed. They are also eligible for unemployment compensation at the end
of their term.

An analysis performed by Vander Meulen showed that contracting out
for this service could have saved the city an estimated 14 percent this
year. It would also free public works employees to provide other
services around the city, such as maintaining parks, repairing signs and
more street sweeping, according to Vander Meulen.

Reference:
St. Joseph Herald-Palladium, “Privatizing city leaf pickup is off the
table,” Oct. 10, 2007

Mental health authority looks to privatization

SAGINAW — The CEO of the Saginaw County Community Mental Health
Authority recommended the privatization of its Community Ties North and
Community Ties South facilities as a way to save the county $1.1 million
annually, according to The Saginaw News. The facilities offer day care
and training for the developmentally disabled. CEO Sandra Lindsey
recommended that the authority contract with Michigan Community Services
Inc. to operate the two facilities, The News reported.

In response,
union officials representing the current employees made concessions that
would save $700,000 annually. Concessions included switching some
full-time employees to part-time, reducing the number of paid holidays
and offering early retirement.

Lindsey stated that contracting out is unlikely and that the
authority will be exploring other cost-cutting alternatives.

However, the authority did contract out for its skill building and
transportation services, which is expected to save $4.47 million over
the next three years, according to The Swartz Creek News. “My two most
important responsibilities are providing the best possible services for
our consumers and managing the long-term fiscal stability of the
organization. Outsourcing the skill building program is really the only
way we can do both,” Lindsey told The Swartz Creek News.

HARRISON — The Michigan Education Association school employee union
received a court injunction to stop the Harrison Community Schools from
contracting its teachers aides, according to the MEA.

Under current labor law, school districts are able to contract out
for noninstructional services, but not for instructional employees. The
positions in question include recess aides, special education aides and
clerks.

The district is appealing the injunction to the Michigan Court of
Appeals. The Michigan Employment Relations Committee may also decide on
the matter. A ruling from either the court of appeals or MERC can set
the precedent for whether teacher aides are noninstructional employees
or not.

Establishing a clear precedent will relieve districts of uncertainty
in these contracting decisions. If the ruling stands in favor of the
MEA, schools would be left without a cost-saving tool.

HOWELL — The Howell board of education overcame a $2.1 million
budget deficit in part by contracting out custodial and administrative
services.

Contracting out for custodial service is expected to save the
district $400,000 this fiscal year alone. The district’s custodial union
offered concessions that would have saved $242,000, but the district
went with the private vendor, according to The Detroit News.

The district also contracted out four of its administrators, a move
expected to save $135,000, according to The Detroit News. Administrators
can retire and draw pension funds in addition to a salary from the
contract company by returning to work in their previous capacities. The
district will avoid paying pension contributions for the employees and
additional payroll costs like Medicare and Social Security, according to
The News.

The administrators who retire will be hired by Professional Education
Services Group and will start in January as contract employees. The
board is also looking at contracting out 38 childcare positions through
PESG, which could save the district $82,000 annually, the News reported.

Michigan Privatization Digest is a service of the
Michigan Privatization Report, a twice-yearly publication of the Mackinac Center for Public Policy with a circulation of more than 22,000. The Mackinac Center for Public Policy is an independent, non-profit research institute located in Midland, Michigan.